Real Estate Act Comes Into Force. 10 Points On How It Will Protect Homebuyers
New rules under RERA or the Real Estate (Regulation and Development) Act are applicable to residential and commercial development.
New rules under RERA or the Real Estate (Regulation and Development) Act to regulate the real estate sector, protect home buyers and ensure the timely execution of projects with an aim to boost investor confidence and stamp out illegal practices will apply from today. They are applicable to residential and commercial development and make it mandatory for all projects and brokers to be registered with the real estate regulator who will oversee transactions and settle disputes. Only seven states have, however, moved to implement the new rules as yet.
Here’s your 10-point cheat-sheet:
- RERA is a model law, which means the Centre can recommend it but it is up to the states to formulate and pass their own laws, since land is a state subject.
- Till last weekend, only six states had notified the rules – Uttar Pradesh, Gujarat, Odisha, Andhra Pradesh, Maharashtra, Madhya Pradesh and Bihar. The Housing Ministry had last year notified the rules for the five Union Territories and for the National Capital Region of Delhi.
- The Centre has described RERA as the beginning of a new era where the consumer will be king. Union housing minister Venkaiah Naidu said rights and obligations of buyers, developers, and real estate agents are clearly defined in the Act and any aggrieved party can seek redressal for violation of terms of the agreement by the other party.
- On reports that some states have diluted key provisions of RERA, Mr. Naidu said that the states have assured his ministry that these will be corrected.
- Under RERA, real estate developers and agents have to register with their respective state regulatory authorities by July 30. They must also deposit 70 percent of the funds collected from buyers in a separate bank account to be used only for the construction of the project, to ensure timely development. New projects must have all approvals before launch.
- Promoters must have the consent of two-thirds of the buyers in a project before making any change in the number of units or other structural changes. RERA prescribes penalties, including imprisonment on developers who delay projects or do not deliver on promises. Developers are required to disclose their project details on the real estate regulator’s website and provide updates on construction progress.
- RERA also states that any structural or workmanship defects brought to the notice of a promoter within a period of five years from the date of handing over possession must be rectified by the promoter. For delayed possession, developers need to pay an interest rate of 2 percentage points above State Bank of India’s lending rate.
- RERA also prescribes imprisonment of up to three years for errant developers. A developer can sell only on the basis of carpet area which will help home buyers understand what they will be paying for each square foot they will get for use.
- In the last few years, sluggish economic growth and delays in getting approvals stalled several projects, leaving buyers waiting for their homes and developers holding high debts. It also put a strain on investors such as banks, private equity firms and non-banking financial companies.
- Analysts say the real estate sector will be able to attract higher institutional funding as the Act will bring in much desired transparency in the sector, which contributes about 9 percent of India’s gross domestic product, boosting buyer confidence.